Simple IRA & 401(k) contribution aggregation rule
A 56 year old business owner is on track to max out Simple IRA plan for first 8 months of year. At end of month 8, his firm is acquired by another firm and he (the business owner) becomes an employee of the new firm. Now he is eligible to participate in new firm’s 401(k). Is he eligible to contribute to both Simple IRA and the 401(k) max in a given year, or do certain aggregation rules apply? Thank you in advance!
Permalink Submitted by Alan - IRA critic on Fri, 2025-08-29 10:44
Each plan is subject to its own elective deferral limits, but the total elective deferrals for both cannot exceed the 401k deferral limit. That means that the amounts contributed to the SIMPLE IRA must be subtracted from the 401k elective deferral limit of 31,000 (includes catch up contributions).
Permalink Submitted by Jeanette LoPiccolo on Fri, 2025-08-29 11:36
Thank you Alan!